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November 19, 2018

The Man Behind the Iconic Apple Stores: Ron Johnson

by Without Fail

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Twenty years ago, Steve Jobs had an idea: he wanted to build an Apple store. Something sleek and iconic and unlike anything else in retail. But he had no idea how to do it. So he called someone who might: retail genius Ron Johnson. Ron tells Alex the story of what it was like to work with Steve and help transform Apple into a household name. And Ron talks about life after Apple—which included a huge and humbling failure.

Ron Johnson is now CEO and Founder of Enjoy. 

Without Fail is hosted by Alex Blumberg and produced by Sarah Platt. It is edited by Alex Blumberg, Nazanin Rafsanjani and Devon Taylor. Jarrett Floyd and Peter Leonard mixed this episode. Music by Bobby Lord.

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Transcript

<<Theme music>> 


From Gimlet Media, I’m Alex Blumberg. This is Without Fail, the show where I talk with artists, athletes, entrepreneurs, visionaries of all kinds, about their successes and their failures. And what they’ve learned from both. 


<<Theme music out>>   


So, every day I walk to work. I walk down a busy street in Brooklyn, Flatbush Avenue and I pass a ton of stores and shops and commercial outlets. There’s cafes, clothing stores, a shipping center, a super fancy sneaker shop. And you know, they’re sometimes busy. The morning rush at the bagel shop. The line out the door at the sneaker store when they have a hot new shoe in stock. But, at other times, you can go by these places and there’s not much going on. A customer or two. But pretty slow. And that’s most of retail right? Busy times, slow times. But there’s this one store on my walk that bucks this trend. That’s always busy. Packed with people, poring over the merchandise. And it looks completely different too. It’s brand new. All glass. These soaring floor to ceiling windows on all sides. And inside, the decor is all sleek and minimalist. It’s more like a gallery, or a cathedral than a store. 


If you haven’t guessed already, it’s an Apple store. The award-winning, trend defying, single-handed rebuke to the death of brick and mortar retail narrative brought about by Amazon. That store. 


And I mention all this, because nowadays we think of the Apple Store as an institution, as signature a part of the apple brand as the iPhone. But there was a time before the apple store existed. When it was just an idea in someone’s brain. And not just any someone. A very particular someone. A someone who happens to be my guest on today’s show. His name is Ron Johnson. 


And the story of how Ron Johnson built the Apple store into the iconic institution it is today is a fascinating one. First, because of the way Ron Johnson came to Apple. It wasn’t the usual route, through computer engineering and Silicon Valley. He came by a very different path, and nevertheless ended up forming a deep, and fascinating partnership with Steve Jobs, which he talks in very candid detail in our interview. But I also wanted to talk to Ron because of what he did after his time at Apple.

 

After his success with the Apple store, he decided to try something new. Something he was excited about, but everyone else thought he was a little crazy to want. He did it anyway, and it ended up being one of the defining failures of his life. 


We talk about all of this in our conversation. And we began, back at the beginning of his career, when he made a choice that would ultimately set him on the path to his greatest success and his greatest failures. He was graduating from Harvard Business School, and as one of the top students in his program, he had his pick of the most coveted jobs. And there was one job in particular that everyone in his class wanted. Well, almost everyone. 


Ron: When I was at Harvard Business School I graduated in 1984. The dream job was to go to Wall Street or go work in consulting. And like I had the good fortune of getting an offer from Goldman Sachs M and A group which was one of those highly coveted HBS jobs.


Ron: But I had this itch to become a retailer and that's what I did.


Alex: So you got this offer from Goldman, you turned down Goldman and a bunch of other investment banks. Who did you finally say yes to.


Ron: I ended up going to work for a little company that's now not exist and called Mervyn's that's based it was based in Hayward California. I don't think there is a single person but my dad who thought I made a great career decision out of HBS. And people ask me all the time why did you do that? Well what we forget is just as working in technology today is a pretty coveted place for a young graduate to be a computer scientist a data scientist go work for one of these hot tech companies that was really what retail was in 1984. Retailing was the innovative space in the economy. 


It was true, even if Ron’s classmates didn’t find this innovation super sexy. There was a lot happening in retail. This is when specialty retailers like The Gap were just coming on the scene, redefining retail forever, away from just the department store. Ron saw it as an exciting time to be in retail. And he was right. 


Ron did his stint at Mervyn’s and then went to Target where he participated in one of the most successful rebrands in retail history. Ron started Target’s first design partnership, bringing in the well known designer Michael Graves to create products for Target. Target went from being a forgettable retailer to a cool, inexpensive place to shop. It went from Target to Tar jay. And Ron was one of a handful of people at the company to help usher in that transformation. And that’s when he got a phone call. In 1999, from a person saying he was calling on behalf of Steve Jobs. 


Ron: He said you know Apple wants to open retail stores. Would you like to lead the effort for them? And if so Steve would like to meet you and learn more about you and what you might do.


Alex: What? 


Ron: You got to put in context. Apple was not a great company at the time right. Apple was a cult brand with a very low market share that had a very rabid beloved customer base that wanted to grow. And I remember at the time telling my wife and friends I was going to go out and talk to Steve about Apple stores. People thought I was crazy. Well if you approached 2000 it was all about the Internet. It was WebVan, WebVan was exploding the dotcom bubble was happening. Why would Ron go to a struggling niche computer maker to work with a guy who had a legend of being pretty tough to work for when there are all these other great companies in the Valley that were getting all the high stock prices and all the high multiples?


Alex: Right. What drew you to it then?


Ron: I was attracted not to working for Steve or working at Apple. I was attracted to taking what we did at Target with design and getting a chance to apply that to a company like Apple. I would get to figure out where to put stores I would get to figure out how to design a store. I would have to design a new experience for a brand that's never had a customer experience other than what they marketed.// I thought was a fertile field to do something great. And that's what attracted me to it.


Alex: So tell me about that first meeting with him.


Ron: He showed up an hour late you know I was sitting in a little couch next to his conference room next to his office and I was reading, I saw these two knees go by with torn jeans and we sat down for two hours and we just connected. I mean that conversation went by like it was 10 minutes.


Alex: Do you remember what you talked about?


Ron: Well when we started out we just talked about me, retail, Target and it then evolved into Apple in stores and then I remember he said if I could write a billion dollar check today and have 100 great stores I would write that in a nanosecond. 


Alex: Why did why did Steve Jobs think that they should be opening stores? Because that's also sort of an unconventional thing. What was what was what was his thinking?


Ron: Well Steve's I'd say probably without a doubt the smartest but the most intuitive person I know.// Steve cared about his customers. He wanted to serve them in new and interesting ways. But he knew to compete he had to compete not just on the product side but on the customer service side.  And he said you know Ron I've got four billion dollars in the bank. We've got a lot of cash. But what I don't have I don't have a way to talk to the customer directly.


Ron: And we took a walk down to what I later learned was the boardroom at Apple and in there they had the whole product lineup. And it was four computers. It was two portables and two desktops. And I said so this is what we have to sell. And he said yes. And I remember saying to him Well you know most retail stores the size is determined by the product line. We can fit our whole product line on a conference room table. How big a store do you think we should build? And he said I don't know. And I said Well my instinct is you've got to be big enough to be relevant. I said Would you be willing to build a 6000 square foot store he said yes. And I said Well that's an interesting dilemma because we got to figure what to fill all that space with. He said Well why don't you do this. It was it was the week before Thanksgiving if I recall he said why don't you take some time. You have time Thanksgiving weekend just write a little note to me about what you do if you open the store is how you approach the problem. I said sure I can do that. And I went home and jotted down my notes and wrote a little thing and sent it to him. And I never heard from him until he sent me a note that said I had like you to come back. And then at the end of the day I sat down with Steve and I said So what did you think of my ideas. He goes Oh I do think they're very good but I really like you and I'd like to offer you the job. And you know at that moment Steve offered me the job to run the retail stores. And so it was really two hours with him a little bit of time his leadership team and we decided it was the right thing to do.


Alex: And a couple of not very good ideas, apparently.


Ron: That's what he said at the time. 


Alex: Got it. So OK. So you signed up. You like and how long before, how long from the time you took the job to the first store opened.


Ron: So I started February of 2000. Our first store opened in May 2001. Now I twiddle my thumbs for the first months. My only meeting a week was the executive team meeting. But I had to kind of imagine what a store would be. I had to start building a team.


Ron: You know there's a lot of work to do and it was interesting though Steve had the idea you know you ought to rent a warehouse and build out a prototype. And that was really a thing a retailer wouldn't do but obviously a company like Apple would do. They also built prototypes of products right. And why not build a prototype of a store. And so about two to three miles from campus we built out a place. 


Alex: What was this space that you rented out?


Ron:  It was just warehouse you know your typical warehouse space in the valley. // But it was so much fun. We had a 6000 square foot space and every week we try something new.


Alex: So you've been in retail now your whole life and you have never gone through a process like this designing a store.


Ron: I never picked a piece of real estate or designed a store in my life. I've never designed a house. And I liked architecture. I'd never had to do that.


Alex: Wait so, take me through that process more so because this is very fascinating to me.


Ron: Every Tuesday we'd meet for the morning. I'd lead the meeting Steve would give his input and then the next week we change it all and try again. If I didn't have Steve I don't know if we were to get it done. I mean Steve is so good at this.


Alex: What was what made him good. 


Ron: You know it was amazing Steve would come over at 9:00 probably get there 15 minutes late 915 every Tuesday.


Ron: And we'd have worked for a week on the store design and they are radically different. And he would literally park his car, walk in the front or stop look at 6000 square feet. You know with his hand on his chin and he'd say here's what I'd like and here's what I don't. He could pick up all of the changes on the spot.


Alex: Really.


Ron: So if we if the week before we had talked about you know our tables are 36 inches high we should drop them to 34 because we'll be better to rest your hand for the computer. Steve would come in and say I like the new table height.


Alex: And you hadn't told him.


Ron: No he knew we're going to work on it. But he could tell. And he'd remember everything we had talked about changing from the week before. If you showed him a graphic image of a window display Steve would come in and say well I liked this better last week, I like this now. His ability to incisively critique a creative endeavor was second to none. And his intuition his understanding of what customers would respond to was unparalleled. It was a gift for me to work with him because you're always in business when you’re inventing things you've got to balance the dream with the data. Most people the data overtakes the decision making and then you don't have a dream. Steve always stayed focused on the prize. You know he could articulate it so clearly like he used to love to do things in three or four words. like we all remember the iPod. How do you describe the iPod. A thousand songs in your pocket right. What was the iPhone. We're going to reinvent the phone. You know Steve had an ability to stay focused on the prize better than anybody I know and he wouldn't bring a product out or open a store until he believed it was as perfect as he could imagine it. 


Alex: Yes. Well you know he’s famous for not mincing words and can be you know like I guess critical or scary or or could like did you ever get into that.


Ron: You know Steve was I don’t know, he was always pretty great to me you know. Very kind. Very supportive. And Steve I think and I got along really quite well. I was never as close to Steve as some of the other members ET that had worked with him before. We didn't do a ton personally outside of work. We talked on the phone every night you know 8:00 o'clock sharp. I knew the phone rang. It was Steve


Alex: He called you every night.


Ron: The first year. Every night. But that was Steve because he intentionally used to say my management style is like a butterfly. I want to be all float in where things are new or things need help. But other than that I want to delegate and let people go. The only way I can delegate to you Ron with confidence is if you can know exactly how I would think about an issue that you're trying to figure out on your own. And the only way you can know I think is if we're really close. So what time do your kids go to bed? And I said go to be eight o'clock he goes if you might don't mind I'll call you after the kids go to bed and catch up every day. And literally for my first year at Apple I think the phone would ring at 8 o'clock Ron, Steve. I'd say hi. And there would be a long pause and I'd say, well how was your day. And he talked to me about Apple. He talked me about personal things we talk about the stores but he wanted me to understand how he thought.


Alex: Those phone calls that happened every night. Like how long did they go?


Ron: Oh it's a half hour. I mean honestly I felt like I felt like when I was in it when you were in eighth grade did you ever have a girlfriend.


Alex: Sadly no. But I wanted one.


Ron: I think I did too.


Ron: But remember back then now you have to pick up the phone. Yeah. And you know the way phones work back then if you had four phones in the house you know your brother might get on the other line. Listen and or your parents make it on and used to go hide somewhere and you'd call this girl and you're nervous as heck. But then you'd have a conversation and you talk about a lot of irrelevant stuff because you're just trying to build a relationship. I kind of felt when I started work for Steve I had the eighth grade girlfriend finally because


Alex: You were on the phone with your crush.


Ron: I was on the phone with my crush. 


Alex: Wow that's amazing.


Alex: Okay, so you're prototyping the store you're having these conversations with Steve Jobs. Was there anything that you sort of went down and then ultimately totally scrapped.


Ron: Yeah. So we had a major fork in the road which became just it was such a great glimpse into Steve. So Steve and I, we had made the decision early on to design the store not about products but of what you do. I remember saying to Steve one night on one of the 8:00 calls and I've been thinking about you know the Mac’s kind of the center of your digital universe. Think about the Mac at the center. You know all these devices. And he said could you write that down and you know I said sure. And I remember going to Monday's ET and he goes guys I've got a vision. The Mac is the digital hub. And that was in September of 2000. And I think it was January 2001 when Steve announced the vision for Apple that the Mac would become the digital hub. Well the next morning on Tuesday when I went to work, Steve would like me to meet his office we driver together in his car and I showed up in his office and I said Steve I’ve been think about the stores. I think we've got it all wrong. You know we've organized a store on products. I think should re-lay out the store. And he looked at me and he got really didn't get upset really upset. And he said Ron do you know how hard I've worked on this store because I've been coming over here for nearly a half a year. Every Tuesday and we finally got something I want to build and you want to tear it up. I don't know that I have the energy to do this. I don't want you to bring it up today. I said OK. So we get in this car and we drive this two to three mile probably takes 10 15 minutes over the warehouse.


Ron: Didn't say a word I didn't say a word. I didn't think he was very happy.


Alex: What do you think while you're driving over in silence?


Ron: I just figure I'm not going to push it on I'm here. 


ALEX: Got it. 


RON: I've made my point. He made his point. Let's go. I was more curious how the day would start.


Ron: So we park a car we walked in at that time we probably had 30 to 40 people in there waiting for Steve to come. Steve walks in and he looks around as he always did he walked and he said well guys Ron thinks this store is all wrong. And he's right. So I'm going to leave now and I'll come back when you've redesigned store.


Ron: And that was it. He left. He called me that night at 8:00 o'clock and he said Ron, he goes, you reminded me of a really important lesson. Everything great I've done I've had to have the courage at some point in the process to start over and rethink it. And he told me stories about every Pixar movie done how they're pretty close to want to release the movie. They realize you know we could change the ending. We could improve a character. He went through some of the products he done at Apple and how you had to know when it was good enough. And he said I'm really proud of you for challenging the design of the store. And he goes I'm going to have you lead it a little more because I don't know that I have the energy to start from scratch. But we ought to do it better. And that was just a great example of Steve's leadership you know. It's pretty quick to go from don't talk about it, to a three mile car ride, to say we're going to change this thing. But that was Steve. And because of that we built a better store.


Alex: So so you guys go through this whole thing. You redesign it in the middle what describe your when it first opened. Like the night before the first store open to the public. What are you thinking what you're feeling?


Ron: Oh you have no clue if it's any good. I mean like until it's all done you can't even evaluate it.


Ron: We had barricades up so you couldn't even look in from the mall or the street to see or to look like right. Everyone's got ladders. You don't know. And then the big question is will people come. It was the night before the first opening we opened two stores. I told Steve you know let's not advertise our advertising’s our real estate. We'll send out an e-mail to Apple people within a hundred miles to tell him we're opening our first store. And we'll see if they come and he said fine. And I remember getting a call from one of my partners on the East Coast and she called to say Ron I don’t think it’s going to work very well.  It's 45 minutes before it opens and we have 30 people in line. Maybe we should advertise or start to think through what I'm going to tell Steve.


Alex: That's bad or good


Ron: Bad. No one was there. It was like we are expecting more people than 30 people in the applique it's pretty good people at it’s keynote. 


Alex: Yeah. 


Ron: And I'm thinking oh my god we threw a party and didn't invite anybody. But then also she gives me a call she's Ron. They're starting to come and when they open that store there were fifteen hundred people in line. So interestingly all of the Apple people wanted to be there for the opening but like me they didn't know how many people would be there. So they just showed up at 10:00 was an open and we had lines out that store all day. So I was down in Glendale for the Glendale opening and the same thing you know now I feel a little better because nobody came there at the start we had maybe 50 people at about 9 15. By the time the store opened they were snaked through the line by the Nordstrom stairs out into the parking lot where we had to hustle and give water it was a hot day. This is May in California as a warm spring day and we had people thousands of people in line.


<<Tape of Ron welcoming people to the store>>


Ron: We had 10,000 people I think it was visit each of those stores opening day which is unheard of.


Alex: What was that like for you?


Ron: It's just really gratifying. I stayed. I was in the Glendale store from 8:00 in the morning that day till the last customer left 8:00 at night. And then we sat with the team and kind of brought it all in. I spent the whole day there is such a gratifying thing after you've worked so hard at something to get to experience. 


Alex: So after after that after the first initial. Was there just a feeling of like wow this is a hit and we just got to..


Ron: No it was awful. No. No remember we opened in May. September 11th 2001 happened three months later. Nobody wanted to go to malls. People were scared to go to malls. Apple was not having a particularly great year. We didn't have really products for many people because most people wouldn't switch from a PC to a Mac. So the early adopters who loved Apple came to the store in May June or July but they wouldn't come back to we announced a new product. People just walked by the store in the mall didn't stop in. So we actually made the store smaller by 2003 because we were worried about how do we make money. 


Alex: And it strikes me that like the problem that you identified that very first day when you met Steve Jobs and he was showing you his product lineup that was the problem up until


Ron: that was the problem, yeah.


Alex: you didn't have enough to sell.


Ron: So we actually made the store smaller by 2003 because we were worried about how do we make money.


Things might have gone on this way — with people walking by the store, admiring it through the windows, but not actually going inside and buying anything. But then, something huge happened. That’s coming up, after these words from our sponsors. 


<<BREAK>>


Welcome back to Without Fail and my conversation with Ron Johnson. The thing that took the Apple store from being a cool novelty store to retail juggernaut was this (blast of music). 


This is an Apple ad from 2004. The one with those  dancing silhouettes rocking out to music that they are listening to on their iPods. If you were around and glanced at a tv in 2004, you’ve probably seen them. They’re super cool, and stylish, and they feature this brand new apple technology, the perfect tool for taking advantage of the rise of digital music. And as the ad concludes, words appear on the screen -- for Mac or PC. You no longer needed a Macintosh computer to use Apple products. And that was big. 


The iPod went to windows and the stores became famous. It was when we finally had a product that would appeal to everybody that the real genius of the Apple store design came to fruition. 


Ron: But that's what the other thing you know the Apple stores did really well during my time and they continue to flourish. But you can't separate what the store was from Apple's incredible innovation in the hardware and software right. You know the stores became the new face of Apple and they've been a wonderful thing. But the real strength of Apple was that constant flow of life changing life breathing products that really became the engine to want to visit an Apple store to learn about these things. You know we launched the iPhone. Everyone wanted to touch that phone to see what a new interface without a dial would be you know the stores became a beautiful stage for people to experience what people in Cupertino created.


Ron: And that you know without Cupertino's great work the stores wouldn’t have been great. Right. But I do believe without the stores Apple wouldn't be great. 


Alex: If it hadn't been for the stores what do you think would have been the problem with Apple.


Ron: Nobody would know about it. Apple wasn't even sold in Best Buy until 2004. The leading consumer electronics retailer in the world didn't carry Apple products when I joined Apple you could buy them at Sears. Not exactly a household name anymore.  


Alex: Yeah. 


Ron: And your local Apple Specialist. Right. And and CompUSA right. There wasn't really a lot of distribution.You know it's really hard to build a hardware business when the channel is so concentrated.


After 12 years, Ron turned an experiment with retail into a resounding success. He’s helped Apple open roughly 350 stores and expand into 13 countries. And he could have kept at it — opening stores, tweaking them a little, and collecting a paycheck. But he started to feel the itch — the itch for something new. 


Ron:  And I think it at one point I decided am I going to stay with Apple which had become quite frankly a hobby. We had gotten pretty good at identifying sites we had gotten pretty good at building stores. It wasn't really the challenge it was when we had launched.


Ron: Right. And being someone that likes to be an underdog likes a big challenge. Boy, what could be more exciting than trying to reinvent a department store. So when Penney's called they first called me about a board seat but then that quickly became after a bunch interviews. Would you like to become the CEO. 


Alex: I imagine you have to tell Steve was he like Wait was it. Was he like wait you want to go. You want to leave Apple and go to work at J.C. Penney.


Ron: Yeah. No his. His reaction was more Ron if you want to run a company there are a lot of companies you could run. I have a lot of people I know in the world. I have a lot of people who are in the valley. There are a lot of great companies. I don't know why you'd go to a B or C retailer when you could go to a really good company. You know that was his advice.


Ron: And he went through and looked at the board, he wasn't super impressed by the whole squad and he just did not understand why I wanted to do it but I just told him you know I have a little fondness in my heart for the department store.


Alex: Where where does that love come from?


Ron: Well it's it comes from I think a love of people. So when I came out of undergrad at Stanford I went to work in one of these big accounting firms and our office was in downtown Minneapolis in the tall ideas center big building.


Ron: [01:41:05] Now you'd park about two blocks away but because it was so cold you didn't have to walk outside. The department store. Dayton's would open up its main floor the store I could walk through the store to get to work every day and every morning I walked through that store remember the greeter, Jim. We used to chat every morning and I'd ask him what's new in the store. And as I walked down that department store I'd see all these new products all the time and then I found I'd go to a mall and I had incredible energy being around all the creativity of people in all the service and young families and old and kids and I just loved being in the physical store and I realize at its heart that I love and get energy from people and what a great retailer does is they make connections all day long with people. //


ALEX: So you said I'm going to do it now and then and then you ended up taking the job. 


Ron: when I finally accepted the job Steve said I have one request he has. I'd like you to stay at Apple. He was really in poor health at the time for another six months and it turned out. I joined J.C. Penney the same month that you know Steve passed away. You know so I was able to spend his last time with them which was great. But I had this window when I had to kind of get to know the team everyone knew I was coming right.


Alex: And what kind of shape was J.C. Penney in at that time when you when you became CEO.


Ron: Well they were actually pretty pretty solid. They were growing at about the same rate as Macy's. They were not losing share but the department stores were losing share. 


Department stores were struggling to keep up with new shopping habits. Everything was going online, Amazon was taking over, and JC Penney’s loyal customer base was aging. Ron knew he would have make big changes to the company.


Ron: I was pretty worried about going into a long established company and trying to exercise exercise a major transformation with a company that might not quite have the stomach for it. And so I had this nervousness inside.


Ron: I almost didn't go I remember going to the board in October saying I'm not sure was the right thing. I actually gave a presentation to the board and I said you know this is what I'm going to do.


Alex: What was that and what was in that presentation?


Ron: The fundamental thing was we had to change everything right. The big issue with large retailers your customers get older and if you're going to succeed in any business you got to have a young customer. So I wanted to find a way to win the hearts and minds of the young family while serving the current customer better right. Well the problem was that they had this pricing strategy where the average item in the store was sold at 60 percent off well if you're gonna take 60 percent off to sell it the product doesn't have much value on its own or you wouldn't do that right. So I made the decision that the way the world was going was to everyday low price. That's where Wal-Mart had succeeded. That's what the Gap had done in the heyday. You know let's just make every day a great day to shop. Don't wait for a sale don't click the coupons. Every is a great day to shop. Now when we did that, I remember telling the board we’re going to go through the toughest year of our lives because we're not going to promote for an entire year. So we will run decreases because last year we got people in the store through promotion. We've got to cleanse ourselves and get to a base business. But we were done whatever that new base is, we will start to grow because we'll start to attract a new customer. If you don't want I don't have to come but they said no we want to do that. And so I started in November and we moved very fast.  


Alex: So what happened? Did this new approach work?


Ron: Well we went into that thinking our sales would drop 15 percent and I think they dropped 19. Well to me that's pretty close right. You know let's tweak and adapt but to the board like all their friends on Wall Street what do you letting this guy do? Penney’s spent you know 100 years building out of business and you're losing 20 percent overnight. You guys are crazy. 


Ron: And so it became a very difficult press environment for everybody.


Alex: Well it's funny because around this time I was running a show on NPR called Planet Money andone of our reporters Zoe Chace fantastic reporter. She did a story about the transformation of J.C. Penney that I want to play you just a clip of because she found this woman who was a J.C. Penney shopper who I think is probably emblematic of at least some of the other people who are there. Let me just play this clip.


Ron: Sure.


<<PLANET MONEY: CAROL VICKERY: When it first happened, I was traumatized; and I'd come home and I'd cry over it. My husband was like, what's wrong? I said, Penney's don't have no sales no more. I need my store back.


CHACE: Carol Vickery had a ritual of shopping at her J.C. Penney in Tallahassee, Florida, a ritual that included something that Ron Johnson had just taken away, bargain hunting. And there were a lot of Carol Vickerys.


VICKERY: On Saturdays, we would go in at 9 and shop until 1. And then you'd get coupons; you got 50 percent off $10. And the store would be so packed. You would always be bumping into people, getting through your stuff. It was crazy. It was great, though.>>


Alex: They were like, they just wanted the coupons back.


Ron: Right. So that’s true. When you think about it, 19 percent of the customers missed their coupon 81 percent 4 out of 5 went to Penney's. And to me I was more concerned about the 80 percent who stayed and treated them well than the 20 percent who only value the company for a discount. Now that's a business choice. But that's what I believed and I agree with you of an 80 percent of the customers happy and build on that base and attract new people. Then spend your time not changing. 


ALEX: When when when did you realize in your tenure there like oh oh this is maybe not going to work out.


Ron: I think probably three to six months into the transformation. You just feel the support for the strategy waning as time went on. 


Alex:  Yeah. It's so interesting though there comes a time when when you're like OK we did this thing because we thought x and y and we're in the middle of our and we're in the middle of it and X and Y are maybe not happening but maybe they will


Ron: The biggest mistake people make is they don't have the courage to withstand the abyss. But when you go through life no matter what you're trying to do if you're changing a personal habit, it's really hard. Now you want to get in shape you want to exercise you start running. It's really hard. But if you stick with it pretty soon you'll love running. Same with companies when you have a problem. You're losing share, your customer’s aging. You got to change and you want to pick the right change. But the most important thing you better stick it out because there is a garden on the other side. You got to see it through. And you got to do a lot of watering, a lot of pruning, a lot of investing, a lot of planting and eventually you'll succeed. But the most important thing is don't undertake a transformation without a commitment to seeing it through.


Alex: The data that you were looking at is sort of like yes. You know like our customers have dropped by 20 percent 18 percent but the customers that are sticking around that that 80 percent that are sticking around they like the store better.


Ron: They loveed it. They absolutely and the employees all the employees loved it because they didn't have to deal with all these coupons and all of these people have an expired coupon. But I think a lot of people really liked where we were headed and wanted us to succeed. But the noise in the press the noise where the volume was just too high. 


<<CNBC: This is a crisis. JCP has basically nosedived into the ground in a very short period of time. JCP could fail very very quickly. 


WARREN BUFFETT: When you start arguing with your customers about what they want, that’s not a great idea. And they’ve got a very very tough game to play from this point forward. 


YAHOO NEWS GUY: Complete idiots. They took a perfectly profitable monster cash flow company and put it directly into the toilet with some giant experiment.. >>


Alex: Did you ever have those have your own dark nights of the soul where you're like man maybe this isn't right.


Ron: Oh, all no all the time and I knew I had made mistakes with Pennies but they were fatal. I could have done things differently but at some point arrogance is not be willing to listen to other people. And I kind of got to a point where I said you know there are a lot of people who feel differently about this strategy. And that's when I volunteered multiple times to step aside and eventually board called said Ron we're going to go a different direction I said you know..Good luck. You know I will gladly step aside. But anyway that's enough Penneys it's the most I've ever talked about it.


Alex: So OK how do you pick back up from that and what did you decide to do next.


Ron: Well I didn't have to work again. But I started to I decided you know weren't as bad as Penneys was. I knew that my whole life had been a blessing. You know you get to work with Steve to go to Apple at the right time to be at Target at the right time. I'd been more lucky than not and I realized in my bones what I love doing is creating new things. I really love the idea of transformation. And wouldn't it be great to try that again. And I realize that in my career out of 38 years I probably had eight great years. But that's what you work for. You know because most of the time you're building you're trying to create something new. The economy's gone bad. It's rare when you're doing something that everybody in the world says boy those guys are nailing it. You know we had a few years at Apple said those are the best retail stores in the world. We had a few years at Target where Target is the hottest retailer on the planet right. That's what I want to get to at J.C. Penney. We didn't get there but I wanted the chance to do that again because I had an idea that I thought and I now think is even much much bigger than I've done before. Right. And once I got that idea into my head I had to do it. 


What that idea was..after this break. 


<<BREAK>>


Welcome back to Without Fail and my conversation with Ron Johnson. This thing Ron had to do was invent the mobile retail store. And so in 2015, he started a company called Enjoy to do just that. Say you are purchased a new phone online from AT&T. On there’s a website there’s a button, that’s Ron’s company Enjoy. They partner with online retailers to help deliver their goods to their customer and get them set up. Companies like AT&T, Sonos. A bunch of companies like that that are selling things that are complicated that you need a little bit of help setting up. It’s working pretty well, he already has over a thousand employees, he’s operating in nearly 40 cities, including in the United Kingdom. And while Ron is excited about what he’s built, what he’s most proud of is the culture he’s been able to create. 


Ron: We've built a culture here out of kindness right. It's something I believe I believe we choose to be kind. Every moment that it's the most important decision we make as an individual right. We built a whole company of kind people. We hire kind people. You know that's something I can do. That's not that common.


Alex: How did you just send to me company kindness part a part of your culture.


Ron: Because I think it's why we're here on the planet right. What we're here to make life better not for ourselves but our neighbors the people we come across in a retail environment your customers your employees. Right. And so I just felt if we built a business out of kindness you know we would create something that has no limit to how successful it would be. You know and if we're trying to go through people's doors and be invited in their living rooms and their kitchens and their dining rooms and we're now in their home if we can't establish a human connection based on a time honored value like kindness we won't ever get a chance to succeed. 


Alex: I'm curious about this just because like something culture is something that we think about a lot as well and we're we’re you know a little over 100 people. For us it was just like you know there's 20 of us or 10 or 10 or 15 of us and it's like you're sort of like a band it doesn't. You don't need to think about culture it's just sort of like the way you behave in the room. But it has gotten bigger we've had to sort of make it more intentional and sort of like show and kindness I think is something that I am very drawn to. But I don't know if I would have had the guts to sort of put it in part as part of our mission


Ron: It is. It is our number one value. You know I I tell the story to the team all the time when my son Will was in about sixth grade. He and I he and I would have breakfast every day at a local coffee shop in Menlo Park called Ann’s and every parent knew if they wanted they could drop off their boys and they could have free breakfast and Ron would drive the kids to school. One day. Two boys there Andrew and Will and we were chatting before school and I said I got a question for you kids. You know who's the best athlete in the class you know the kids love to talk about that. And Will looks at his buddy and says be Dash and Dash goes, Yeah I'm pretty good athlete. And then I said Well who's the smartest kid in the class. And Dash looked over and said I think that might be Will your son. And then I said who's the nicest person in the class and they thought about that for a bit and they gave me the name of a boy. And I said you know it's interesting. Wouldn't it be amazing if the best athlete were the nicest kid.


Ron: What if the smartest person in the room was the kindest? You know the only one who's making a choice here is the one that chooses kindness. If you're smart that's a gift. If you're a great athlete that's a gift. Kindness is a choice. And I believe that for my entire life I was brought up my Minnesota upbringing. And I believe that's true with companies. When you go in the Apple store and you see a genius helping somebody that's an act of kindness, that's making love visual in the world. You know when we go through the door and help someone we get up and running with a new product for free. And everyone's laughing and having fun and the kids are involved the families around that's making love visual. This is like a time honored gift that we try to provide to people and we think kindness is what the world needs more of and it's really a pleasure to build a company of value that everyone will embrace. It's just not chosen enough.


Alex: I'm very stirred by that. I find it really moving and it's like. And it is it is something like I wish more people would choose. I am also like curious like how do you actually though sort of like put that into practice like do you do you recruit for kind. How do you do that on a practical basis?


Ron: Here's what you do on a practical basis you choose people who are kind and that's very easy to find most people are. And then you train people on technology we can all learn technology right. You train people you hire people for different skills but at the end of the day you want people who love helping others and you meet people you can tell people are kind of self-oriented and people are other-oriented. Right. Right. You make those choice. And so I think you can build a company. I think most great companies are built on timeless values because then they will be universally embraced.


<<MUSIC>>


Next time on Without Fail.


Caterina Fake, co-founder of Flickr, who says when Yahoo wanted to buy the company...she didn’t want to sell:


CATERINA: We did a phone call and I remember saying you know Shutterfly is preparing to go public. And I said I don't see why we couldn't be on that same path. And I remember they laughed. The investors laughed like no this Flickr thing will never be like that. 

 


That’s next time on Without Fail.


Without Fail is hosted by me, and produced by Sarah Platt. It is edited by me, Nazanin Rafsanjani and Devon Taylor. Jarrett Floyd and Peter Leonard mixed the episode. Music by Bobby Lord.


If you like Without Fail -- leave us a review. And tell your friends! 


And thanks for listening.









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Transcript

The Man Behind the Iconic Apple Stores: Ron Johnson

<<Theme music>> 


From Gimlet Media, I’m Alex Blumberg. This is Without Fail, the show where I talk with artists, athletes, entrepreneurs, visionaries of all kinds, about their successes and their failures. And what they’ve learned from both. 


<<Theme music out>>   


So, every day I walk to work. I walk down a busy street in Brooklyn, Flatbush Avenue and I pass a ton of stores and shops and commercial outlets. There’s cafes, clothing stores, a shipping center, a super fancy sneaker shop. And you know, they’re sometimes busy. The morning rush at the bagel shop. The line out the door at the sneaker store when they have a hot new shoe in stock. But, at other times, you can go by these places and there’s not much going on. A customer or two. But pretty slow. And that’s most of retail right? Busy times, slow times. But there’s this one store on my walk that bucks this trend. That’s always busy. Packed with people, poring over the merchandise. And it looks completely different too. It’s brand new. All glass. These soaring floor to ceiling windows on all sides. And inside, the decor is all sleek and minimalist. It’s more like a gallery, or a cathedral than a store. 


If you haven’t guessed already, it’s an Apple store. The award-winning, trend defying, single-handed rebuke to the death of brick and mortar retail narrative brought about by Amazon. That store. 


And I mention all this, because nowadays we think of the Apple Store as an institution, as signature a part of the apple brand as the iPhone. But there was a time before the apple store existed. When it was just an idea in someone’s brain. And not just any someone. A very particular someone. A someone who happens to be my guest on today’s show. His name is Ron Johnson. 


And the story of how Ron Johnson built the Apple store into the iconic institution it is today is a fascinating one. First, because of the way Ron Johnson came to Apple. It wasn’t the usual route, through computer engineering and Silicon Valley. He came by a very different path, and nevertheless ended up forming a deep, and fascinating partnership with Steve Jobs, which he talks in very candid detail in our interview. But I also wanted to talk to Ron because of what he did after his time at Apple.

 

After his success with the Apple store, he decided to try something new. Something he was excited about, but everyone else thought he was a little crazy to want. He did it anyway, and it ended up being one of the defining failures of his life. 


We talk about all of this in our conversation. And we began, back at the beginning of his career, when he made a choice that would ultimately set him on the path to his greatest success and his greatest failures. He was graduating from Harvard Business School, and as one of the top students in his program, he had his pick of the most coveted jobs. And there was one job in particular that everyone in his class wanted. Well, almost everyone. 


Ron: When I was at Harvard Business School I graduated in 1984. The dream job was to go to Wall Street or go work in consulting. And like I had the good fortune of getting an offer from Goldman Sachs M and A group which was one of those highly coveted HBS jobs.


Ron: But I had this itch to become a retailer and that's what I did.


Alex: So you got this offer from Goldman, you turned down Goldman and a bunch of other investment banks. Who did you finally say yes to.


Ron: I ended up going to work for a little company that's now not exist and called Mervyn's that's based it was based in Hayward California. I don't think there is a single person but my dad who thought I made a great career decision out of HBS. And people ask me all the time why did you do that? Well what we forget is just as working in technology today is a pretty coveted place for a young graduate to be a computer scientist a data scientist go work for one of these hot tech companies that was really what retail was in 1984. Retailing was the innovative space in the economy. 


It was true, even if Ron’s classmates didn’t find this innovation super sexy. There was a lot happening in retail. This is when specialty retailers like The Gap were just coming on the scene, redefining retail forever, away from just the department store. Ron saw it as an exciting time to be in retail. And he was right. 


Ron did his stint at Mervyn’s and then went to Target where he participated in one of the most successful rebrands in retail history. Ron started Target’s first design partnership, bringing in the well known designer Michael Graves to create products for Target. Target went from being a forgettable retailer to a cool, inexpensive place to shop. It went from Target to Tar jay. And Ron was one of a handful of people at the company to help usher in that transformation. And that’s when he got a phone call. In 1999, from a person saying he was calling on behalf of Steve Jobs. 


Ron: He said you know Apple wants to open retail stores. Would you like to lead the effort for them? And if so Steve would like to meet you and learn more about you and what you might do.


Alex: What? 


Ron: You got to put in context. Apple was not a great company at the time right. Apple was a cult brand with a very low market share that had a very rabid beloved customer base that wanted to grow. And I remember at the time telling my wife and friends I was going to go out and talk to Steve about Apple stores. People thought I was crazy. Well if you approached 2000 it was all about the Internet. It was WebVan, WebVan was exploding the dotcom bubble was happening. Why would Ron go to a struggling niche computer maker to work with a guy who had a legend of being pretty tough to work for when there are all these other great companies in the Valley that were getting all the high stock prices and all the high multiples?


Alex: Right. What drew you to it then?


Ron: I was attracted not to working for Steve or working at Apple. I was attracted to taking what we did at Target with design and getting a chance to apply that to a company like Apple. I would get to figure out where to put stores I would get to figure out how to design a store. I would have to design a new experience for a brand that's never had a customer experience other than what they marketed.// I thought was a fertile field to do something great. And that's what attracted me to it.


Alex: So tell me about that first meeting with him.


Ron: He showed up an hour late you know I was sitting in a little couch next to his conference room next to his office and I was reading, I saw these two knees go by with torn jeans and we sat down for two hours and we just connected. I mean that conversation went by like it was 10 minutes.


Alex: Do you remember what you talked about?


Ron: Well when we started out we just talked about me, retail, Target and it then evolved into Apple in stores and then I remember he said if I could write a billion dollar check today and have 100 great stores I would write that in a nanosecond. 


Alex: Why did why did Steve Jobs think that they should be opening stores? Because that's also sort of an unconventional thing. What was what was what was his thinking?


Ron: Well Steve's I'd say probably without a doubt the smartest but the most intuitive person I know.// Steve cared about his customers. He wanted to serve them in new and interesting ways. But he knew to compete he had to compete not just on the product side but on the customer service side.  And he said you know Ron I've got four billion dollars in the bank. We've got a lot of cash. But what I don't have I don't have a way to talk to the customer directly.


Ron: And we took a walk down to what I later learned was the boardroom at Apple and in there they had the whole product lineup. And it was four computers. It was two portables and two desktops. And I said so this is what we have to sell. And he said yes. And I remember saying to him Well you know most retail stores the size is determined by the product line. We can fit our whole product line on a conference room table. How big a store do you think we should build? And he said I don't know. And I said Well my instinct is you've got to be big enough to be relevant. I said Would you be willing to build a 6000 square foot store he said yes. And I said Well that's an interesting dilemma because we got to figure what to fill all that space with. He said Well why don't you do this. It was it was the week before Thanksgiving if I recall he said why don't you take some time. You have time Thanksgiving weekend just write a little note to me about what you do if you open the store is how you approach the problem. I said sure I can do that. And I went home and jotted down my notes and wrote a little thing and sent it to him. And I never heard from him until he sent me a note that said I had like you to come back. And then at the end of the day I sat down with Steve and I said So what did you think of my ideas. He goes Oh I do think they're very good but I really like you and I'd like to offer you the job. And you know at that moment Steve offered me the job to run the retail stores. And so it was really two hours with him a little bit of time his leadership team and we decided it was the right thing to do.


Alex: And a couple of not very good ideas, apparently.


Ron: That's what he said at the time. 


Alex: Got it. So OK. So you signed up. You like and how long before, how long from the time you took the job to the first store opened.


Ron: So I started February of 2000. Our first store opened in May 2001. Now I twiddle my thumbs for the first months. My only meeting a week was the executive team meeting. But I had to kind of imagine what a store would be. I had to start building a team.


Ron: You know there's a lot of work to do and it was interesting though Steve had the idea you know you ought to rent a warehouse and build out a prototype. And that was really a thing a retailer wouldn't do but obviously a company like Apple would do. They also built prototypes of products right. And why not build a prototype of a store. And so about two to three miles from campus we built out a place. 


Alex: What was this space that you rented out?


Ron:  It was just warehouse you know your typical warehouse space in the valley. // But it was so much fun. We had a 6000 square foot space and every week we try something new.


Alex: So you've been in retail now your whole life and you have never gone through a process like this designing a store.


Ron: I never picked a piece of real estate or designed a store in my life. I've never designed a house. And I liked architecture. I'd never had to do that.


Alex: Wait so, take me through that process more so because this is very fascinating to me.


Ron: Every Tuesday we'd meet for the morning. I'd lead the meeting Steve would give his input and then the next week we change it all and try again. If I didn't have Steve I don't know if we were to get it done. I mean Steve is so good at this.


Alex: What was what made him good. 


Ron: You know it was amazing Steve would come over at 9:00 probably get there 15 minutes late 915 every Tuesday.


Ron: And we'd have worked for a week on the store design and they are radically different. And he would literally park his car, walk in the front or stop look at 6000 square feet. You know with his hand on his chin and he'd say here's what I'd like and here's what I don't. He could pick up all of the changes on the spot.


Alex: Really.


Ron: So if we if the week before we had talked about you know our tables are 36 inches high we should drop them to 34 because we'll be better to rest your hand for the computer. Steve would come in and say I like the new table height.


Alex: And you hadn't told him.


Ron: No he knew we're going to work on it. But he could tell. And he'd remember everything we had talked about changing from the week before. If you showed him a graphic image of a window display Steve would come in and say well I liked this better last week, I like this now. His ability to incisively critique a creative endeavor was second to none. And his intuition his understanding of what customers would respond to was unparalleled. It was a gift for me to work with him because you're always in business when you’re inventing things you've got to balance the dream with the data. Most people the data overtakes the decision making and then you don't have a dream. Steve always stayed focused on the prize. You know he could articulate it so clearly like he used to love to do things in three or four words. like we all remember the iPod. How do you describe the iPod. A thousand songs in your pocket right. What was the iPhone. We're going to reinvent the phone. You know Steve had an ability to stay focused on the prize better than anybody I know and he wouldn't bring a product out or open a store until he believed it was as perfect as he could imagine it. 


Alex: Yes. Well you know he’s famous for not mincing words and can be you know like I guess critical or scary or or could like did you ever get into that.


Ron: You know Steve was I don’t know, he was always pretty great to me you know. Very kind. Very supportive. And Steve I think and I got along really quite well. I was never as close to Steve as some of the other members ET that had worked with him before. We didn't do a ton personally outside of work. We talked on the phone every night you know 8:00 o'clock sharp. I knew the phone rang. It was Steve


Alex: He called you every night.


Ron: The first year. Every night. But that was Steve because he intentionally used to say my management style is like a butterfly. I want to be all float in where things are new or things need help. But other than that I want to delegate and let people go. The only way I can delegate to you Ron with confidence is if you can know exactly how I would think about an issue that you're trying to figure out on your own. And the only way you can know I think is if we're really close. So what time do your kids go to bed? And I said go to be eight o'clock he goes if you might don't mind I'll call you after the kids go to bed and catch up every day. And literally for my first year at Apple I think the phone would ring at 8 o'clock Ron, Steve. I'd say hi. And there would be a long pause and I'd say, well how was your day. And he talked to me about Apple. He talked me about personal things we talk about the stores but he wanted me to understand how he thought.


Alex: Those phone calls that happened every night. Like how long did they go?


Ron: Oh it's a half hour. I mean honestly I felt like I felt like when I was in it when you were in eighth grade did you ever have a girlfriend.


Alex: Sadly no. But I wanted one.


Ron: I think I did too.


Ron: But remember back then now you have to pick up the phone. Yeah. And you know the way phones work back then if you had four phones in the house you know your brother might get on the other line. Listen and or your parents make it on and used to go hide somewhere and you'd call this girl and you're nervous as heck. But then you'd have a conversation and you talk about a lot of irrelevant stuff because you're just trying to build a relationship. I kind of felt when I started work for Steve I had the eighth grade girlfriend finally because


Alex: You were on the phone with your crush.


Ron: I was on the phone with my crush. 


Alex: Wow that's amazing.


Alex: Okay, so you're prototyping the store you're having these conversations with Steve Jobs. Was there anything that you sort of went down and then ultimately totally scrapped.


Ron: Yeah. So we had a major fork in the road which became just it was such a great glimpse into Steve. So Steve and I, we had made the decision early on to design the store not about products but of what you do. I remember saying to Steve one night on one of the 8:00 calls and I've been thinking about you know the Mac’s kind of the center of your digital universe. Think about the Mac at the center. You know all these devices. And he said could you write that down and you know I said sure. And I remember going to Monday's ET and he goes guys I've got a vision. The Mac is the digital hub. And that was in September of 2000. And I think it was January 2001 when Steve announced the vision for Apple that the Mac would become the digital hub. Well the next morning on Tuesday when I went to work, Steve would like me to meet his office we driver together in his car and I showed up in his office and I said Steve I’ve been think about the stores. I think we've got it all wrong. You know we've organized a store on products. I think should re-lay out the store. And he looked at me and he got really didn't get upset really upset. And he said Ron do you know how hard I've worked on this store because I've been coming over here for nearly a half a year. Every Tuesday and we finally got something I want to build and you want to tear it up. I don't know that I have the energy to do this. I don't want you to bring it up today. I said OK. So we get in this car and we drive this two to three mile probably takes 10 15 minutes over the warehouse.


Ron: Didn't say a word I didn't say a word. I didn't think he was very happy.


Alex: What do you think while you're driving over in silence?


Ron: I just figure I'm not going to push it on I'm here. 


ALEX: Got it. 


RON: I've made my point. He made his point. Let's go. I was more curious how the day would start.


Ron: So we park a car we walked in at that time we probably had 30 to 40 people in there waiting for Steve to come. Steve walks in and he looks around as he always did he walked and he said well guys Ron thinks this store is all wrong. And he's right. So I'm going to leave now and I'll come back when you've redesigned store.


Ron: And that was it. He left. He called me that night at 8:00 o'clock and he said Ron, he goes, you reminded me of a really important lesson. Everything great I've done I've had to have the courage at some point in the process to start over and rethink it. And he told me stories about every Pixar movie done how they're pretty close to want to release the movie. They realize you know we could change the ending. We could improve a character. He went through some of the products he done at Apple and how you had to know when it was good enough. And he said I'm really proud of you for challenging the design of the store. And he goes I'm going to have you lead it a little more because I don't know that I have the energy to start from scratch. But we ought to do it better. And that was just a great example of Steve's leadership you know. It's pretty quick to go from don't talk about it, to a three mile car ride, to say we're going to change this thing. But that was Steve. And because of that we built a better store.


Alex: So so you guys go through this whole thing. You redesign it in the middle what describe your when it first opened. Like the night before the first store open to the public. What are you thinking what you're feeling?


Ron: Oh you have no clue if it's any good. I mean like until it's all done you can't even evaluate it.


Ron: We had barricades up so you couldn't even look in from the mall or the street to see or to look like right. Everyone's got ladders. You don't know. And then the big question is will people come. It was the night before the first opening we opened two stores. I told Steve you know let's not advertise our advertising’s our real estate. We'll send out an e-mail to Apple people within a hundred miles to tell him we're opening our first store. And we'll see if they come and he said fine. And I remember getting a call from one of my partners on the East Coast and she called to say Ron I don’t think it’s going to work very well.  It's 45 minutes before it opens and we have 30 people in line. Maybe we should advertise or start to think through what I'm going to tell Steve.


Alex: That's bad or good


Ron: Bad. No one was there. It was like we are expecting more people than 30 people in the applique it's pretty good people at it’s keynote. 


Alex: Yeah. 


Ron: And I'm thinking oh my god we threw a party and didn't invite anybody. But then also she gives me a call she's Ron. They're starting to come and when they open that store there were fifteen hundred people in line. So interestingly all of the Apple people wanted to be there for the opening but like me they didn't know how many people would be there. So they just showed up at 10:00 was an open and we had lines out that store all day. So I was down in Glendale for the Glendale opening and the same thing you know now I feel a little better because nobody came there at the start we had maybe 50 people at about 9 15. By the time the store opened they were snaked through the line by the Nordstrom stairs out into the parking lot where we had to hustle and give water it was a hot day. This is May in California as a warm spring day and we had people thousands of people in line.


<<Tape of Ron welcoming people to the store>>


Ron: We had 10,000 people I think it was visit each of those stores opening day which is unheard of.


Alex: What was that like for you?


Ron: It's just really gratifying. I stayed. I was in the Glendale store from 8:00 in the morning that day till the last customer left 8:00 at night. And then we sat with the team and kind of brought it all in. I spent the whole day there is such a gratifying thing after you've worked so hard at something to get to experience. 


Alex: So after after that after the first initial. Was there just a feeling of like wow this is a hit and we just got to..


Ron: No it was awful. No. No remember we opened in May. September 11th 2001 happened three months later. Nobody wanted to go to malls. People were scared to go to malls. Apple was not having a particularly great year. We didn't have really products for many people because most people wouldn't switch from a PC to a Mac. So the early adopters who loved Apple came to the store in May June or July but they wouldn't come back to we announced a new product. People just walked by the store in the mall didn't stop in. So we actually made the store smaller by 2003 because we were worried about how do we make money. 


Alex: And it strikes me that like the problem that you identified that very first day when you met Steve Jobs and he was showing you his product lineup that was the problem up until


Ron: that was the problem, yeah.


Alex: you didn't have enough to sell.


Ron: So we actually made the store smaller by 2003 because we were worried about how do we make money.


Things might have gone on this way — with people walking by the store, admiring it through the windows, but not actually going inside and buying anything. But then, something huge happened. That’s coming up, after these words from our sponsors. 


<<BREAK>>


Welcome back to Without Fail and my conversation with Ron Johnson. The thing that took the Apple store from being a cool novelty store to retail juggernaut was this (blast of music). 


This is an Apple ad from 2004. The one with those  dancing silhouettes rocking out to music that they are listening to on their iPods. If you were around and glanced at a tv in 2004, you’ve probably seen them. They’re super cool, and stylish, and they feature this brand new apple technology, the perfect tool for taking advantage of the rise of digital music. And as the ad concludes, words appear on the screen -- for Mac or PC. You no longer needed a Macintosh computer to use Apple products. And that was big. 


The iPod went to windows and the stores became famous. It was when we finally had a product that would appeal to everybody that the real genius of the Apple store design came to fruition. 


Ron: But that's what the other thing you know the Apple stores did really well during my time and they continue to flourish. But you can't separate what the store was from Apple's incredible innovation in the hardware and software right. You know the stores became the new face of Apple and they've been a wonderful thing. But the real strength of Apple was that constant flow of life changing life breathing products that really became the engine to want to visit an Apple store to learn about these things. You know we launched the iPhone. Everyone wanted to touch that phone to see what a new interface without a dial would be you know the stores became a beautiful stage for people to experience what people in Cupertino created.


Ron: And that you know without Cupertino's great work the stores wouldn’t have been great. Right. But I do believe without the stores Apple wouldn't be great. 


Alex: If it hadn't been for the stores what do you think would have been the problem with Apple.


Ron: Nobody would know about it. Apple wasn't even sold in Best Buy until 2004. The leading consumer electronics retailer in the world didn't carry Apple products when I joined Apple you could buy them at Sears. Not exactly a household name anymore.  


Alex: Yeah. 


Ron: And your local Apple Specialist. Right. And and CompUSA right. There wasn't really a lot of distribution.You know it's really hard to build a hardware business when the channel is so concentrated.


After 12 years, Ron turned an experiment with retail into a resounding success. He’s helped Apple open roughly 350 stores and expand into 13 countries. And he could have kept at it — opening stores, tweaking them a little, and collecting a paycheck. But he started to feel the itch — the itch for something new. 


Ron:  And I think it at one point I decided am I going to stay with Apple which had become quite frankly a hobby. We had gotten pretty good at identifying sites we had gotten pretty good at building stores. It wasn't really the challenge it was when we had launched.


Ron: Right. And being someone that likes to be an underdog likes a big challenge. Boy, what could be more exciting than trying to reinvent a department store. So when Penney's called they first called me about a board seat but then that quickly became after a bunch interviews. Would you like to become the CEO. 


Alex: I imagine you have to tell Steve was he like Wait was it. Was he like wait you want to go. You want to leave Apple and go to work at J.C. Penney.


Ron: Yeah. No his. His reaction was more Ron if you want to run a company there are a lot of companies you could run. I have a lot of people I know in the world. I have a lot of people who are in the valley. There are a lot of great companies. I don't know why you'd go to a B or C retailer when you could go to a really good company. You know that was his advice.


Ron: And he went through and looked at the board, he wasn't super impressed by the whole squad and he just did not understand why I wanted to do it but I just told him you know I have a little fondness in my heart for the department store.


Alex: Where where does that love come from?


Ron: Well it's it comes from I think a love of people. So when I came out of undergrad at Stanford I went to work in one of these big accounting firms and our office was in downtown Minneapolis in the tall ideas center big building.


Ron: [01:41:05] Now you'd park about two blocks away but because it was so cold you didn't have to walk outside. The department store. Dayton's would open up its main floor the store I could walk through the store to get to work every day and every morning I walked through that store remember the greeter, Jim. We used to chat every morning and I'd ask him what's new in the store. And as I walked down that department store I'd see all these new products all the time and then I found I'd go to a mall and I had incredible energy being around all the creativity of people in all the service and young families and old and kids and I just loved being in the physical store and I realize at its heart that I love and get energy from people and what a great retailer does is they make connections all day long with people. //


ALEX: So you said I'm going to do it now and then and then you ended up taking the job. 


Ron: when I finally accepted the job Steve said I have one request he has. I'd like you to stay at Apple. He was really in poor health at the time for another six months and it turned out. I joined J.C. Penney the same month that you know Steve passed away. You know so I was able to spend his last time with them which was great. But I had this window when I had to kind of get to know the team everyone knew I was coming right.


Alex: And what kind of shape was J.C. Penney in at that time when you when you became CEO.


Ron: Well they were actually pretty pretty solid. They were growing at about the same rate as Macy's. They were not losing share but the department stores were losing share. 


Department stores were struggling to keep up with new shopping habits. Everything was going online, Amazon was taking over, and JC Penney’s loyal customer base was aging. Ron knew he would have make big changes to the company.


Ron: I was pretty worried about going into a long established company and trying to exercise exercise a major transformation with a company that might not quite have the stomach for it. And so I had this nervousness inside.


Ron: I almost didn't go I remember going to the board in October saying I'm not sure was the right thing. I actually gave a presentation to the board and I said you know this is what I'm going to do.


Alex: What was that and what was in that presentation?


Ron: The fundamental thing was we had to change everything right. The big issue with large retailers your customers get older and if you're going to succeed in any business you got to have a young customer. So I wanted to find a way to win the hearts and minds of the young family while serving the current customer better right. Well the problem was that they had this pricing strategy where the average item in the store was sold at 60 percent off well if you're gonna take 60 percent off to sell it the product doesn't have much value on its own or you wouldn't do that right. So I made the decision that the way the world was going was to everyday low price. That's where Wal-Mart had succeeded. That's what the Gap had done in the heyday. You know let's just make every day a great day to shop. Don't wait for a sale don't click the coupons. Every is a great day to shop. Now when we did that, I remember telling the board we’re going to go through the toughest year of our lives because we're not going to promote for an entire year. So we will run decreases because last year we got people in the store through promotion. We've got to cleanse ourselves and get to a base business. But we were done whatever that new base is, we will start to grow because we'll start to attract a new customer. If you don't want I don't have to come but they said no we want to do that. And so I started in November and we moved very fast.  


Alex: So what happened? Did this new approach work?


Ron: Well we went into that thinking our sales would drop 15 percent and I think they dropped 19. Well to me that's pretty close right. You know let's tweak and adapt but to the board like all their friends on Wall Street what do you letting this guy do? Penney’s spent you know 100 years building out of business and you're losing 20 percent overnight. You guys are crazy. 


Ron: And so it became a very difficult press environment for everybody.


Alex: Well it's funny because around this time I was running a show on NPR called Planet Money andone of our reporters Zoe Chace fantastic reporter. She did a story about the transformation of J.C. Penney that I want to play you just a clip of because she found this woman who was a J.C. Penney shopper who I think is probably emblematic of at least some of the other people who are there. Let me just play this clip.


Ron: Sure.


<<PLANET MONEY: CAROL VICKERY: When it first happened, I was traumatized; and I'd come home and I'd cry over it. My husband was like, what's wrong? I said, Penney's don't have no sales no more. I need my store back.


CHACE: Carol Vickery had a ritual of shopping at her J.C. Penney in Tallahassee, Florida, a ritual that included something that Ron Johnson had just taken away, bargain hunting. And there were a lot of Carol Vickerys.


VICKERY: On Saturdays, we would go in at 9 and shop until 1. And then you'd get coupons; you got 50 percent off $10. And the store would be so packed. You would always be bumping into people, getting through your stuff. It was crazy. It was great, though.>>


Alex: They were like, they just wanted the coupons back.


Ron: Right. So that’s true. When you think about it, 19 percent of the customers missed their coupon 81 percent 4 out of 5 went to Penney's. And to me I was more concerned about the 80 percent who stayed and treated them well than the 20 percent who only value the company for a discount. Now that's a business choice. But that's what I believed and I agree with you of an 80 percent of the customers happy and build on that base and attract new people. Then spend your time not changing. 


ALEX: When when when did you realize in your tenure there like oh oh this is maybe not going to work out.


Ron: I think probably three to six months into the transformation. You just feel the support for the strategy waning as time went on. 


Alex:  Yeah. It's so interesting though there comes a time when when you're like OK we did this thing because we thought x and y and we're in the middle of our and we're in the middle of it and X and Y are maybe not happening but maybe they will


Ron: The biggest mistake people make is they don't have the courage to withstand the abyss. But when you go through life no matter what you're trying to do if you're changing a personal habit, it's really hard. Now you want to get in shape you want to exercise you start running. It's really hard. But if you stick with it pretty soon you'll love running. Same with companies when you have a problem. You're losing share, your customer’s aging. You got to change and you want to pick the right change. But the most important thing you better stick it out because there is a garden on the other side. You got to see it through. And you got to do a lot of watering, a lot of pruning, a lot of investing, a lot of planting and eventually you'll succeed. But the most important thing is don't undertake a transformation without a commitment to seeing it through.


Alex: The data that you were looking at is sort of like yes. You know like our customers have dropped by 20 percent 18 percent but the customers that are sticking around that that 80 percent that are sticking around they like the store better.


Ron: They loveed it. They absolutely and the employees all the employees loved it because they didn't have to deal with all these coupons and all of these people have an expired coupon. But I think a lot of people really liked where we were headed and wanted us to succeed. But the noise in the press the noise where the volume was just too high. 


<<CNBC: This is a crisis. JCP has basically nosedived into the ground in a very short period of time. JCP could fail very very quickly. 


WARREN BUFFETT: When you start arguing with your customers about what they want, that’s not a great idea. And they’ve got a very very tough game to play from this point forward. 


YAHOO NEWS GUY: Complete idiots. They took a perfectly profitable monster cash flow company and put it directly into the toilet with some giant experiment.. >>


Alex: Did you ever have those have your own dark nights of the soul where you're like man maybe this isn't right.


Ron: Oh, all no all the time and I knew I had made mistakes with Pennies but they were fatal. I could have done things differently but at some point arrogance is not be willing to listen to other people. And I kind of got to a point where I said you know there are a lot of people who feel differently about this strategy. And that's when I volunteered multiple times to step aside and eventually board called said Ron we're going to go a different direction I said you know..Good luck. You know I will gladly step aside. But anyway that's enough Penneys it's the most I've ever talked about it.


Alex: So OK how do you pick back up from that and what did you decide to do next.


Ron: Well I didn't have to work again. But I started to I decided you know weren't as bad as Penneys was. I knew that my whole life had been a blessing. You know you get to work with Steve to go to Apple at the right time to be at Target at the right time. I'd been more lucky than not and I realized in my bones what I love doing is creating new things. I really love the idea of transformation. And wouldn't it be great to try that again. And I realize that in my career out of 38 years I probably had eight great years. But that's what you work for. You know because most of the time you're building you're trying to create something new. The economy's gone bad. It's rare when you're doing something that everybody in the world says boy those guys are nailing it. You know we had a few years at Apple said those are the best retail stores in the world. We had a few years at Target where Target is the hottest retailer on the planet right. That's what I want to get to at J.C. Penney. We didn't get there but I wanted the chance to do that again because I had an idea that I thought and I now think is even much much bigger than I've done before. Right. And once I got that idea into my head I had to do it. 


What that idea was..after this break. 


<<BREAK>>


Welcome back to Without Fail and my conversation with Ron Johnson. This thing Ron had to do was invent the mobile retail store. And so in 2015, he started a company called Enjoy to do just that. Say you are purchased a new phone online from AT&T. On there’s a website there’s a button, that’s Ron’s company Enjoy. They partner with online retailers to help deliver their goods to their customer and get them set up. Companies like AT&T, Sonos. A bunch of companies like that that are selling things that are complicated that you need a little bit of help setting up. It’s working pretty well, he already has over a thousand employees, he’s operating in nearly 40 cities, including in the United Kingdom. And while Ron is excited about what he’s built, what he’s most proud of is the culture he’s been able to create. 


Ron: We've built a culture here out of kindness right. It's something I believe I believe we choose to be kind. Every moment that it's the most important decision we make as an individual right. We built a whole company of kind people. We hire kind people. You know that's something I can do. That's not that common.


Alex: How did you just send to me company kindness part a part of your culture.


Ron: Because I think it's why we're here on the planet right. What we're here to make life better not for ourselves but our neighbors the people we come across in a retail environment your customers your employees. Right. And so I just felt if we built a business out of kindness you know we would create something that has no limit to how successful it would be. You know and if we're trying to go through people's doors and be invited in their living rooms and their kitchens and their dining rooms and we're now in their home if we can't establish a human connection based on a time honored value like kindness we won't ever get a chance to succeed. 


Alex: I'm curious about this just because like something culture is something that we think about a lot as well and we're we’re you know a little over 100 people. For us it was just like you know there's 20 of us or 10 or 10 or 15 of us and it's like you're sort of like a band it doesn't. You don't need to think about culture it's just sort of like the way you behave in the room. But it has gotten bigger we've had to sort of make it more intentional and sort of like show and kindness I think is something that I am very drawn to. But I don't know if I would have had the guts to sort of put it in part as part of our mission


Ron: It is. It is our number one value. You know I I tell the story to the team all the time when my son Will was in about sixth grade. He and I he and I would have breakfast every day at a local coffee shop in Menlo Park called Ann’s and every parent knew if they wanted they could drop off their boys and they could have free breakfast and Ron would drive the kids to school. One day. Two boys there Andrew and Will and we were chatting before school and I said I got a question for you kids. You know who's the best athlete in the class you know the kids love to talk about that. And Will looks at his buddy and says be Dash and Dash goes, Yeah I'm pretty good athlete. And then I said Well who's the smartest kid in the class. And Dash looked over and said I think that might be Will your son. And then I said who's the nicest person in the class and they thought about that for a bit and they gave me the name of a boy. And I said you know it's interesting. Wouldn't it be amazing if the best athlete were the nicest kid.


Ron: What if the smartest person in the room was the kindest? You know the only one who's making a choice here is the one that chooses kindness. If you're smart that's a gift. If you're a great athlete that's a gift. Kindness is a choice. And I believe that for my entire life I was brought up my Minnesota upbringing. And I believe that's true with companies. When you go in the Apple store and you see a genius helping somebody that's an act of kindness, that's making love visual in the world. You know when we go through the door and help someone we get up and running with a new product for free. And everyone's laughing and having fun and the kids are involved the families around that's making love visual. This is like a time honored gift that we try to provide to people and we think kindness is what the world needs more of and it's really a pleasure to build a company of value that everyone will embrace. It's just not chosen enough.


Alex: I'm very stirred by that. I find it really moving and it's like. And it is it is something like I wish more people would choose. I am also like curious like how do you actually though sort of like put that into practice like do you do you recruit for kind. How do you do that on a practical basis?


Ron: Here's what you do on a practical basis you choose people who are kind and that's very easy to find most people are. And then you train people on technology we can all learn technology right. You train people you hire people for different skills but at the end of the day you want people who love helping others and you meet people you can tell people are kind of self-oriented and people are other-oriented. Right. Right. You make those choice. And so I think you can build a company. I think most great companies are built on timeless values because then they will be universally embraced.


<<MUSIC>>


Next time on Without Fail.


Caterina Fake, co-founder of Flickr, who says when Yahoo wanted to buy the company...she didn’t want to sell:


CATERINA: We did a phone call and I remember saying you know Shutterfly is preparing to go public. And I said I don't see why we couldn't be on that same path. And I remember they laughed. The investors laughed like no this Flickr thing will never be like that. 

 


That’s next time on Without Fail.


Without Fail is hosted by me, and produced by Sarah Platt. It is edited by me, Nazanin Rafsanjani and Devon Taylor. Jarrett Floyd and Peter Leonard mixed the episode. Music by Bobby Lord.


If you like Without Fail -- leave us a review. And tell your friends! 


And thanks for listening.









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